4 L. Ballester, R. Ferrer, and C. Gonz ́alez
4Data
The sample consists of all commercial banks listed on the Spanish Stock Exchange
for at least one year over the period January 1993 – December2005 (23 banks in
total). Monthly stock returns have been obtained from theBolsa de Madriddatabase.
The market portfolio used is a modified version of theIndice General de la Bolsa de
Madrid (IGBM), the widest Spanish stock market index. Due to the major relevance
of bank stocks in the IGBM, an alternative index where banks are excluded has been
constructed in order to obtain a series of market returns as exogenous as possible. Mar-
ket interest rates have been proxied by the monthly average yield on 10-year Spanish
government bonds and the 3-month average rate of the Spanish interbank market,
whereas the interest rate spread has been computed as the difference between them.
Following [5] and [16], interest rate volatility has been measured by the conditional
variance of interest rates, which is generated using a GARCH process.
To check whether there is a relationship between bank size and IRR, bank stocks
have been sorted by size into three portfolios – large (L), medium (M) and small (S)
banks. This classification (see Table 1) is based on the three categories of commercial
banks typically distinguished in the Spanish banking industry. Thus, the L portfolio
includes the banks that have given rise to the two currently multinational Spanish
banking conglomerates (B. Santander and BBVA). The M portfolio is made up of a
group of medium-sized Spanish banks that operate in national territory. Finally, the S
portfolio is constituted by a broad set of small banks that operate mostly at a regional
Ta b le 1 .List of banks and composition of bank portfoliosPortfolios Asset Volume (C× 103 ) Obs. Portfolios Asset Volume (C× 103 )Obs.
Portfolio L
BSCH 396,124,995 81 B. Bilbao Vizcaya 100,026,979 85
BBVA 297,433,664 71 Argentaria 69,998,972 80
B. Santander 113,404,303 75 B. Central Hispano 68,793,146 75
Portfolio M
Banesto 42,332,585 156 Bankinter 15,656,910 156
B. Exterior 32,130,967 51 B. Pastor 8,789,945 156
B. Popular 29,548,620 156 B. Atlantico ́ 7,591,378 138
B. Sabadell 26,686,670 56
Portfolio S
B. Zaragozano 4,597,099 130 B. Galicia 1,726,563 156
B. Valencia 4,213,420 156 B. de Vasconia 1,330,458 156
B. Guipuzcoano 4,082,463 156 B. de Vitoria 875,974 62
B. Andaluc ́ıa 3,521,838 156 B. Credito Balear ́ 854,972 156
B. Herrero 2,624,824 95 B. Alicante 835,576 64
B. de Castilla 2,151,742 156 B. Simeon ́ 686,451 67
This table displays the list of Spanish commercial banks considered and their distribution in
portfolios according to size criteria (portfolios L, M and S).